It comes a day after the government said it was to give £1.2m of public money to a project aimed at moving the UDA away from violence and crime.

Det Supt Esmond Adair of the PSNI's anti-extortion team said only 1-3% of extortion was reported to police.

He said there was "significant evidence the UDA are involved in extortion".

"We have a number of successful operations carried out this year so far, where we have mounted three operations and 11 searches and 10 people have been arrested."

The officer told the BBC's Nolan Show that millions of pounds is being extorted by paramilitary groups.

It doesn't have to be paid - we have taken massive steps to encourage members of the construction industry and small businesses not to pay extortion

Det Supt Esmond Adair

"We are very aware that extortion is rife in Northern Ireland," he said.

"It is a vastly under-reported crime. We reckon that only 1-3% of extortion is actually reported to police."

Det Supt Adair said the perception that victims who contacted police would be attacked was not the case.

"It is a very heavy burden for someone to take that first step forward, but when they do, we successfully prosecute those persons who are involved in extortion.

"In my six years in dealing with extortion, we have never had any reprisals."

The detective said some extortionists visited building sites and "give a price per unit" or a "price per contract".

'Business plan'

The police have seen cheques for as much as £100,000 being paid to extortionists, he said.

"It doesn't have to be paid - we have taken massive steps to encourage members of the construction industry and small businesses not to pay extortion."

The PSNI have set up a new extortion helpline (02890922267).

It's madness - it's like the Americans handing the mafia £1m or £1bn to go away

Building contractor

The £1.2 funding for the "UDA project" was announced by Social Development Minister David Hanson on Thursday.

The Ulster Political Research Group has spent the past six months drawing up a business plan to persuade the government to fund a 3-year project.

Mr Hanson said: "I expect that this additional support will deliver a quickening in pace of the work of the UPRG in their conflict transformation work that the latest IMC report identified was required."

The £1.2m will be used in six areas where the UDA has a strong presence, and to employ up to a dozen staff.

A developer who contacted the BBC's Nolan Show on Friday said he personally knew a contractor who was paying the UDA £700 a week in protection money.

"It is a big contract and by the time that site is finished, he will have paid £92,000.

"This is going on as we speak. I had four men on that site at one time, and they were put off that site because of their religion.

A group working with the UDA is to get £1.2m of public money

"The protection money is collected on a Friday and handed over in an envelope in cash."

He said the building foreman was "scared for his life".

"They (the UDA) are taking about their areas being deprived - they have put their own people out of business.

"It is so corrupt in every shape and form, and then they (the government) turn round and give them a million quid.

"It's madness - it's like the Americans handing the mafia £1m or £1bn to go away."